The most recent depreciation of the dollar is due to increased demand, as supply has remained normal according to the Bank of Jamaica (BOJ). But the bank expects the FX market to soon return to more nomal patterns.

In a news release yesterday, the Bank of Jamaica noted the recent movement in the exchange rate and the renewed expressions of concern by some participants about the pace of movement and the availability of foreign currency supply.

Since the start of the year the exchange rate has depreciated by 3.2 per cent, reversing the appreciation of 2.5 per cent that occurred in December 2019.

“This recent movement in the exchange rate was related to an increase in demand, as supply conditions have remained normal,” the BOJ said.

“In fact, the average of daily inflows of foreign currency into the market for January to date has been approximately US$31 million, which was greater than the average daily inflows for January 2019,” the BOJ said.

The increase in demand has been related, in part, to restocking activities by retailers, the bank said, as well as financial institutions buying on behalf of their customers to fund real sector investments and planned portfolio-related transactions.

The bank said that that traders have also been buying on their own account since the start of the year, to restore their foreign currency positions, having sold more foreign currency to the market than they bought in December 2019.

“These transactions are temporary in nature and Bank of Jamaica expects the foreign exchange market to revert to more normal patterns in the near future,” the BOJ said.

“Bank of Jamaica will continue to monitor activities in the foreign exchange market and stands ready to take appropriate policy actions if the need arises,” the bank said.